Facts

Plaintiff Davlyn Investments Inc. sued defendant AEL Financial LLC regarding a purported commercial lease for a photocopier. Plaintiff claimed that an agent of AEL that delivered a photocopier, intended to be a replacement for a broken copier, told a Davlyn employee that the paperwork she was signing was a receipt for delivery when in fact she was signing a new lease for an allegedly new copier.

When Davlyn's corporate office started receiving collection notices for lease payments from AEL, Davlyn's corporate counsel contacted AEL to inform them that the employee who signed the disputed lease agreement didn't have authority to sign contracts for the corporation.

AEL refused to cancel the alleged lease agreement and instead filed suit against Davlyn in Illinois, AEL's home state, for breach of contract. Davlyn retained Illinois counsel and challenged the suit on the grounds of forum non conveniens, obtaining the dismissal of the lawsuit on those grounds.

Davlyn then filed suit in California against AEL for fraud and abuse of process.

AEL cross-complained against Davlyn for breach of contract. On the day before trial, AEL dismissed its cross-complaint and the case proceeded to trial by jury on Davlyn's claims.

PLAINTIFF'S CONTENTIONS:
Plaintiff claimed that AEL's agent had intentionally misrepresented the nature of the paperwork that the employee had signed. Plaintiff contended that upon AEL being notified of the Davlyn employee's lack of authority to sign contracts, AEL produced a forged "Certificate of Incumbency" purporting to show that Davlyn's employee did have authority to sign the lease agreement. When Davlyn showed conclusively that the purported Certificate of Incumbency was a forgery, AEL agreed to cancel the lease and accept the return of the copier "if it had not been used to make too many copies." The copier had only been at Davlyn's business location for less than three months at this time and hadn't been used by Davlyn at all after the first month. Upon inspecting the copier's counter, it showed that the copier had been used to make in excess of 80,000 copies and the manufacturer's tag showed that the copier was over three years old, not new as had been represented. Upon learning this, AEL refused to cancel the purported lease agreement and filed it's suit in Illinois.

Plaintiff contended that AEL ratified the fraud of its agent who delivered the photocopier and then fraudulently obtained the signature of plaintiff's employee on an AEL lease agreement. The ratification occurred because AEL accepted the benefits of the fraudulently obtained lease agreement by filing suit in Illinois to enforce the lease and again in California after the Illinois case had been dismissed on procedural grounds. AEL further ratified the fraud by continuing to rely on a provably forged Certificate of Incumbency to assert that Davlyn's employee was authorized to sign the purported lease agreement.

Plaintiff also claimed that AEL committed fraud and was liable for abuse of process by causing a verified complaint to be filed in Illinois on the forged signature of its collection's manager. AEL created false internal documents to support its contention that it had contacted Davlyn within days of the copier being delivered to confirm delivery and verify the lease terms. The purported call sheet showed that the alleged phone call was made on Thanksgiving day when no one at Davlyn's facility was working and also incorrectly showed that the copier was located at Davlyn's corporate offices in San Diego when in fact the copier was located at an office in Riverside.

During discovery, it was learned that the verified complaint filed by AEL in Illinois was verified on the forged signature of AEL's then collections manager, Larry Petrusha, who later testified at deposition that the signature on the verified Illinois complaint wasn't his, despite the fact that Deborah Ashaen, AEL's Illinois attorney, notarized it.

DEFENDANT'S CONTENTIONS:
AEL contended that the lease agreement was a valid contract. Defendant argued that, if there was fraud committed, it was by the independent contractor who delivered the copier and procured the signature on the lease. AEL contended it wasn't liable for any fraud.

Settlement Discussions

The parties attended a pre-trial settlement conference with retired Superior Court Judge Michael S. Hider. AEL offered a waiver of costs and attorney's fees in return for a dismissal, with prejudice, of Davlyn's lawsuit and a dismissal, with prejudice, of AEL's cross-complaint in return for a waiver of costs and attorney's fees by Davlyn.

Result

The jury found AEL Financial LLC liable for fraud and abuse of process and awarded $19,150 in compensatory damages. The jury also found AEL had acted with malice, oppression and fraud and was therefore liable for punitive damages. In a bifurcated trial, the jury awarded punitive damages to Davlyn in the amount of $535,000.

Other Information

AEL has filed Motions for New Trial and Judgment Notwithstanding the Verdict on both the underlying verdict and the award of punitive damages. Riverside County Superior Court Judge Sharon J. Waters presided over the punitive damages phase of the trial by stipulation of counsel due to Judge Reimer's unavailability. FILING DATE: April 13, 2011.

Deliberation

eight hours

Poll

12-0 (on all issues, including punitive damages)

Length

five days